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Walmart (WMT) earnings preview: Stock at new high ahead of Q3 report

After successfully surviving the e-commerce onslaught, Walmart (NYSE: WMT) is currently riding on the digital revolution in the retail sector. The positive economic momentum and the improvement in customers’ spending power have helped the company maintain the momentum in the first half of the year.

When the retail behemoth reports its third-quarter earnings Thursday before the opening bell, the market will be looking for earnings of $1.09 per share, which is slightly below last year’s levels. The estimate for revenue is $128.63 billion.

Key Factors

The ongoing expansion of the next-day delivery service, which is currently accessible to about two-thirds of the country’s population, is estimated to have contributed to top-line growth during the October-quarter. The launch of new e-commerce fulfillment centers, with a focus on the overseas market, complements the revamp of the delivery and pickup services.

Walmart’s (WMT) Q2 results beat market estimates

Those factors, combined with the management’s store remodeling initiatives and efforts to rejig the assortments, will result in another strong comparable sale performance. On the e-commerce front, recent acquisitions and partnerships have helped the company increase traffic and boost customer experience.

Caution

Meanwhile, the strain on profitability from costs associated with last year’s buyout of Indian e-commerce firm Flipkart will persist in the to-be-reported quarter, thought the deal continues to contribute to top-line growth. Also, the softness in the performance of Sam’s Club will remain this time, in the wake of the stores removing many tobacco products from the shelves.

Related: Walmart e-commerce: The ebbs and flows continue

With the holiday season around the corner, Walmart is set to reap benefits of the conducive macroeconomic environment and thriving job market during the remainder of the year and beyond.

Looking Back

Comparable store sales remained positive in the last quarter, though growth slowed year-over-year. Total sales rose 2% to about $130 billion, reflecting the stable sales performance in the domestic market. Walmart earned $1.27 per share in the second quarter, which is below the prior-year levels.

Mixed Q3 for Amazon

Last month, arch-rival Amazon (AMZN) lost significant market value after the e-tail giant’s third-quarter earnings fell short of expectations as the bottom-line was dragged down by an increase in operating expenses. At $70 billion, revenues were up 24%.

Related: Wal-Mart Q4 2019 Earnings Conference Call Transcript

Walmart shares have set new records consistently in the past several months. Though the stock reversed the trend briefly a few months ago, it bounced back and returned to growth mode after the second-quarter report. The stock is up 26% since the beginning of the year.

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